- About Us
Bainbridge City Council hacks revenue assumptions
The city came with a budget. Council members came with a hatchet.
During the first round of budget discussions on Wednesday, Bainbridge City Council members slashed more than $3 million in revenue assumptions – the foundation of the 2009-2010 proposed budget. The show of financial solidarity among council members essentially put the city administration back on the drawing board with reduced funds to manipulate.
“I believe the decision you made today will take a lot of digestion,” Mayor Darlene Kordonowy said at the end of the six-hour meeting. “It’s going to take a lot of time to go back and readjust.”
Reducing revenue assumptions will force the council and the city administration to balance spending against a tighter wallet – the tradeoff most likely will mean delaying or cutting capital projects, reducing services and selling surplus city property to conform to new revenue forecasts.
The actions reveal council members’ feelings that, if anything, the local and national economy will remain for the next two years at or slightly above the unprecedented levels of decline seen in 2008.
“We are not getting good news from anyone,” Councilor Debbie Vancil said. “With our bond sales, we’re not getting good news from the banks, from the estate industry or retail. We didn’t get good news two years ago when building and development started dropping and when real estate excise tax started coming in down.
“It’s no longer and issue of writing on tea leaves, it’s writing on the wall,” she added.
Vancil proposed suspending the annual 1 percent property tax increase the city is allowed to levy against island residents. She believed the 1 percent increase, although lower than the rise of inflation, would be damaging to some island families struggling to pay their mortgages. The motion was quashed in a 4-2 vote – council Chairman Bill Knobloch was absent at Wednesday’s meeting.
The rest of the budget workshop showed relative unanimity among an often-split City Council.
“The council has come together with a great deal of common vision looking for an even more conservative and frugal plan for next year,” Councilor Barry Peters said. “I think it’s a sensitive response to the international crisis we find ourselves in.”
Council took aim at the staff’s assumptions for sales tax, real estate excise tax and building and development services for the next two years.
Finance Director Elray Konkel predicted 2008 will end with $3.05 million in sales tax revenue for the city; the council voted to keep assumptions at $3.05 million for the next two years, reducing prospective sales tax revenue by $485,000 in 2009 and $663,000 in 2010.
The council made the conservative assumptions despite the state’s enactment of the Streamlined Sales Tax agreement, which took effect on July 1, 2008. SST allows local municipalities to gather tax revenue on products that are shipped to Bainbridge from other cities, states or internet businesses. The State Department of Revenue believes an additional $35 million to $40 million in tax revenue will come into the state annually as a result of SST.
Council also decided to keep forecasts on real estate excise tax – halved this year due to the housing market collapse – at the 2008 level. That would result in a prospective reduction of $334,000 and $888,000 in 2009 and 2010, respectively.
The move leaves open the possibility that revenues could exceed expectations. If that were to happen, any spending above what is approved in the 2009-2010 budget would have to be approved by the city council. Whether that money would be saved, allocated towards capital projects or supplied to city departments remains unknown.
“That is one of the things we are wrestling with,” councilor Chris Snow said. “To have a fall-back budget if circumstances improve and revenues increase, and conversely if things are worse than we predict.”
Another area, building and development services, is likely to be targeted by the council for fee increases. Council members opted not to include those proposed increases in the revenue forecast and to keep building and development revenue stagnant at $1.17 million over the next two years.
The actions culminate in cuts of roughly $1.3 million from the 2009 and $2.2 million from the 2010 revenue assumptions, Konkel estimated,
The administration and council members also discussed the city’s ability to bond in 2009. Steve Gaidos, the city’s bond consultant, suggested that if the market doesn’t rebound the city may want to issue bond anticipation notes – essentially a short-term bank loan which would be paid off when the city bonds for money in a better market.
“Assuming there is a bank willing to lend, this would be a short-term obligation from 6 months to 3 years,” Gaidos said. “There is practically no money available for bonds right now. The city could try to sell bonds, it’s not impossible, but we just just don’t know what will happen.”
The freeze on the bond market and the cuts to revenue assumptions will likely take a toll on proposed capital projects. Council members reaffirmed pushing back a voter-approved bond for the expansion of the Bainbridge Island Senior Center to 2010, and it is possible police and court facilities will also need to be put on hold.
Council members were expected to take an in-depth look at their capital spending on Wednesday, but focused instead on revenue assumptions.
The reductions to those assumptions almost guarantees cuts to capital projects for the next two years.
“As I look at the 2009 and 2010 budget there is a $53 million city in ‘09 and an $83 million city in 2010,” Peters said. “I don’t see how we can do an $83 million dollar city in 2010.”
The next budget workshop is scheduled 3-9 p.m. Oct. 29 at City Hall, with 30 minutes of public comment to begin at 7 p.m.